Page 11 - Banking Finance November 2020

RBI CORNER

The RBI governor also emphasised on The central bank had originally an- "Such HFCS shall be required to submit
the need to build capital buffers for nounced the on-tap TLTRO aggregat- to the RBI, a board-approved plan
banks and non-banking financial com- ing Rs 1 trillion in the monetary policy within three months, including a road
panies (NBFCs) to deal with stress on October 9. map to fulfil the above-mentioned cri-
caused by the pandemic. "Both fiscal teria and timeline for transition," said
and monetary policy were counter-cy- RBI says HFCs must lend the final guidelines.
clical and accommodative and both
were working in close symmetry," he 60% of loans for housing HFCS unable to fulfil the above criteria
said, while stating that the fiscal mea- only will be treated as NBFC- Investment
and Credit Companies.
sures taken by the government to deal RBI has released the final guidelines
with the pandemic have so far have
for housing finance companies (HFCS). RBI temporarily postpones
been well calibrated and prudent. In its It said all non-banking financial compa-
monetary policy meet earlier this circular on current account
month, Das had stated that the Indian nies (NBFCS) should have at least 60 RBI has deferred banks' current ac-
economy is entering into a decisive per cent of their net assets deployed count maintenance norm till Decem-
phase in fight against coronavirus and in the business of providing finance for ber 15, from November 5, pending a
contraction in Q1 economic growth is housing, and those who still don't have
that ratio, must do so in a phased frequently asked question that the cen-
behind us.
manner by March 31, 2024. HFCS can- tral bank would publish on its website.
not levy foreclosure charges, or pre- As part of its monetary policy on Au-
RBI to release on-tap
payment penalties on any floating rate gust 6, the central bank said no bank
TLTRO funds every Mon- term loan sanctioned for housing loans. can open current account for a cus-
day Of the total net assets, at least 50 per tomer who has availed cash credit or

RBI has said banks can avail on-tap cent should be loans given to individu- overdraft facility from others in the
funds under the targeted long-term als. Loans given for furnishing dwelling banking system, and from now on, all
repo operations (TLTRO) to invest in units, against mortgage of property for transactions will now have to be
papers issued by companies in the ag- any purpose other than buying or con- routed through the cash credit, or
riculture, agri-Infrastructure, secured struction of a new dwelling unit or overdraft account.
retail, micro, small and medium enter- renovation of the existing dwelling unit, The RBI said banks should not route
prises (MSMEs), drugs, pharmaceuti- will be treated as non-housing loans withdrawal from term loans through
cals and in healthcare. and will not fall under the definition of current accounts. Instead, the funds
housing finance, stated the RBI'S should be remitted directly to the sup-
The on-tap TLTRO scheme will remain guidelines.
operational till March 31, and all banks plier of goods and services. Expenses
will be eligible to participate. The RBI The RBI took over the regulation of incurred by the borrower for day to day
will be aggregating all requests re- HFCS from the National Housing Bank operations should be routed through
ceived from the banks for the funds, in August 2019, and in June this year, cash credit or overdraft account, if the
and release funds every Monday by released the draft guidelines. borrower has one, otherwise current
initiating a 3-year repo contract with According to the final guidelines, any account can be opened.
the requesting bank, the central bank HFC not having 60 per cent of its net Several banks, mostly private and for-
said in a release on its website. Mul- assets deployed for housing loans must eign banks had lobbied against these
tiple requests by a bank in a week will get 50 per cent of its books utilised for directives, asking the central bank to
be clubbed into a single repo contract. such loans by March 31, 2022, 55 per reconsider the rule.
"In case the requested amount ex- cent by March 31, 2023, and 60 per
ceeds the remaining amount under cent by March 31, 2024. Minimum RBI extends market hours
the scheme on the date of operation, percentage of individual housing loans
the remaining amount will be distrib- in this period should be progressively by 90 mins
uted on a pro-rata basis among all the raised to 40 per cent, 45 per cent, and RBI has said it will restore trading
eligible requests." 50 per cent, respectively. hours in the bond and currency mar-

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